 | Term | Definition |
| |
estimated liablities |
obligations that have uncertainty in the ammount, such as the cost to honor a warranty |
| |
contigent liablities |
potential liablities that depend on a future event related to some past transaction |
| |
definite determinable liabilities |
are obligations that can be measured exactly |
| |
net pay from paycheck |
72.35% |
| |
federal income tax withheld from paycheck |
20% |
| |
FICA tax withheld from paycheck |
6.2% |
| |
medicare tax withhheld from paycheck |
1.45% |
| |
present value |
the value given today of a given amount to be invested or received in the furute, assuming compound interest |
| |
discounting |
to compute the present value of future cash flows |
| |
discount rate |
interst rate used to compute the present value of future cash flows |
| |
bond |
an interest bearing, long-term not payable issued by corporations, universities and government agencies. |
| |
bonds issued at a par |
bonds issued for the face value of the bond. happens when the market rate of interest is equal to the bonds stated rate of interest. |
| |
bonds issued at a discount |
bonds issued for an amount less than the face value of the bond. happens when the market rate is greater than the bonds stated rate of income. |
| |
bonds issued at a premium |
bonds issued for an amount more than the face value of the bond. This happens when the market rate of interest is greater than the bond's stated rate of interest. |
| |
market rate of interest |
interest rate that an investor could earn in an equally risky investment |
| |
discounts on bonds payable |
a contra-liability that is deducted from bonds payable on the balance sheet. it is the difference between the face value of the bond and its selling price, |
| |
carrying value of a bond |
the amount that the balance sheet shows a the net value of the bond. it is equal to the face value of the bond minus any discount or plus any premium |
| |
capital structure |
the combination of debt and equity that a firm uses to finace its business |
| |
financial leverage |
the use of borrowed funds to increase earnings |
| |
future value of a single sum(FV) |
P(1+r)^n |
| |
present value(PV) |
future value/(1+r)^n |
| |
Future value of an ordinary annuity(FVOA) |
(1+r)^n-1/r |
| |
present value of an ordinary annuity(PVOA) |
1/r(1-1/(1+r)^n)) |
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